This Just In: More Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock-pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given this, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about.

Huntington's new rating: Market performLet's get the bad news out of the way first. It's earnings season on Wall Street, and yesterday, we got a whole passel of earnings news from some of the nation's biggest regional banks. Last year, my Foolish colleague Robert Eberhard mentioned how he thought Huntington Bancshares was looking pretty attractive -- but this morning, the banking analysts at Morgan Keegan begged to differ.

Even with Huntington trading for less than book value and paying out a respectable 2.7% dividend yield, Morgan sees little to like in the stock. With per share profits flat against the year-ago quarter, missing consensus targets by $0.02, and net profit down 6% year-over-year, the most Morgan is willing to say about the bank is that it should track the rest of the market.

Personally, though, I think that's too harsh. Sure, with a return on assets of only 1% and a return on equity south of 10%, Huntington isn't the best banking stock on the block. But selling for barely 11 times earnings, with long-term growth projected at nearly 14%, Huntington still looks modestly undervalued to me. Add the 2.7% divvy to the mix, and I'm almost tempted to call the stock cheap.

JDS Uniphase's new rating: BuyI'm less enthusiastic about today's tech upgrade, however. This morning, analysts at Stifel Nicolaus hiked expectations for communications equipment maker JDS Uniphase. According to Stifel, a combination of easier "comps," respectable sales growth, and "sustainable competitive advantage" all add up to an argument in favor of buying JDS.

Strong results out of F5 Networks (NAS: FFIV) yesterday probably didn't hurt. Tel-equip investors have been worrying about macro trends in the industry ever since Juniper (NYS: JNPR) spooked the market earlier this month. F5's results, however, gave investors permission to ascribe Juniper's poor guidance to "company specific" factors -- and to wax optimistic that JDS will do better. With F5 CEO John McAdam reassuring investors that the telecom equipment market is "definitely solid" and eager to build out their 4G cellphone networks, this augurs well for JDS's results when the company reports earnings on Feb. 1.

But none of this changes the fact that JDS shares look frightfully expensive. Right now, JDS costs about 48 times earnings, despite most analysts agreeing that long-term, about the best the firm can hope to accomplish is 10% annualized profits growth. While 10% growth is certainly respectable, it's still too slow to support a 48 P/E. Unless I'm gravely mistaken, investors who heed Stifel's call to buy JDS ahead of earnings are setting themselves up for disappointment.

Manitowoc's new rating: BuyLast but not least, we come to Longbow's upgrade of Manitowoc. According to the analyst, Manny's cranes business is going great guns right now, with Q4 order activity positive. This lends some credence to the incredible projections of 133% annual earnings growth for each of the next five years we find quoted on Yahoo! Finance.

Some.

There is, however, a small problem with projecting profits growth expectations for a company that's currently earning no profits whatsoever. A firm that in fact lost more than $90 million over the past 12 months, and that burned through $75 million in negative free cash flow. (Namely, how do you "grow" a negative profits numbers ... and do you even want to?) Earlier this month, fellow Fool Dan Caplinger made the argument that 2012 is the year Manitowoc turns the corner, and now here we find a fine analyst like Longbow (literally ranked among Wall Street's Best on CAPS) seconding that emotion. If they're right, then it's possible Manitowoc really is a buy. This year's estimated $0.92 per-share profit, after all, works out to just over a 13-times-earnings valuation on the stock.

Foolish final thoughtAs for me, though, I'm going to sit this one out. I'm not brave enough to contradict an analyst of Longbow's caliber ... at least, not without hard numbers to work with. If you ask me, the best course of action here is to give Manitowoc some time to actually earn these positive profits, and give the analysts an opportunity to update their growth estimates to a number that makes a bit more sense. Then, and only then, can we make an informed decision on whether the price looks reasonable in light of the growth expectations. Stay tuned.

At the time this
article was published The Motley Fool owns shares of Huntington Bancshares, but Fool contributorRich Smithdoes not own shares of, nor is he short, any company mentioned above. He does, however, have public recommendations available on 55 separate companies. Check them out on the Motley Fool CAPS page, where he goes by the handle "TMFDitty" -- and iscurrently ranked No. 353 out of more than 180,000 CAPS members. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.